GST transactions worth Rs 1 lakh crore being probed

GST transactions worth Rs 1 lakh crore being probed

The Directorate General of Analytics and Risk Management (DGARM), which mines Goods and Services Tax (GST) data to expose tax evaders, has compiled a list of over 12,900 business entities, including some big companies and export firms suspected to have availed of input tax credit (ITC) through fake invoices worth over Rs 1 lakh crore since July 1, 2017, when the new indirect tax regime was launched, people familiar with the development said.

 DGARM has captured thousands of suspicious transaction carried by business entities between July 1, 2017 and March 31, 2020 and shared the data with investigative agencies for action. Based on such inputs, the government launched a massive crackdown against GST frauds three weeks ago and arrested 104 people, three officials said, requesting anonymity.

“The data [provided by DGARM] involves names of some big companies and star export houses,” one of the officials said, without specifying names because investigations that would ascertain the actual culpability of such entities are still underway.

“Possibly, some of these major firms could be unintentional victims of fake-invoice supply chains. Agencies will first ascertain the facts before taking action against them,” the official said.

A preliminary estimation suggests that dishonest people and fake business entities have defrauded the government of over Rs 1 lakh crore in GST revenue since July 2017, a second official said.

  While the exact value of GST fraud committed by these 12,900 entities cannot immediately be ascertained because the matter is still under investigation, replying to a question in the Lok Sabha on March 2, 2020, minister of state for finance Anurag Singh Thakur quantified total GST-related evasions at Rs 70,206.96 crore between July 2017 and January 2020. Out of that, Rs 34,591.21 crore had been already recovered.

West Bengal finance minister Amit Mitra in August last year wrote a letter to Union finance minister Nirmala Sitharaman wherein he said the total GST fraud could have already crossed the Rs 1 lakh crore mark since July 2017. HT reported this on August 29, 2019.

“Enforcement agency DGGI [the Directorate General of GST Intelligence] has already started taking action with encouraging results,” the second official said. A nationwide drive, launched about three weeks ago, has resulted into over 100 arrests and 1,161 cases have been booked against 3,479 fake entities who obtained GST registration fraudulently. These fake entities were illegally availing of or passing on input tax credit, he added.

This is the reason why the government has decided to physically verify all such entities that obtained deemed GST registration without providing Aadhaar details between August 21, 2020 and November 16, 2020, a third official said. “It is found that most of such entities do not have actual business and some of them are not available at their registered addresses. They have taken advantage of easy registration process to generate fake bills and misappropriate ITC {input tax credit} worth thousands of crore [of rupees],” he said. Currently, the GST law permits deemed registration 21 days after an application is filed.

Experts said the government must check tax evasion without overreach. Abhishek A Rastogi, partner at law firm Khaitan & Co, said: “The government is working on a war footing basis to track taxpayers who may have availed of inadmissible credit deliberately or unintentionally. While this move will track a lot of cases where credit may have been taken wrongfully, there are chances that lot of genuine transactions may have to go through detailed scrutiny. Accordingly, it is advised that the businesses should be very careful and do necessary due diligence while procuring the supplies from the vendors.” Rastogi has been arguing various petitions on such fake invoice issues.

 Officials mentioned above justified action to punish the dishonest. According to a circular issued by the ministry of finance on January 23, all field formations of central GST were asked to complete in 14 days verification of all non-existent exporters who have been found monetising credit through refund of integrated GST on exports of goods. It was found in most of the cases that the ITC was claimed by exporters on the basis of fake invoices and IGST on exports was paid using such ITC, according to the circular, officials said.


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